By Yasin Ebrahim

Investing.com – The euro jumped to one-month highs against the dollar, shrugging off the European Central Bank’s attempts to downplay bets that rising inflation could force into raising rates as soon as next year.

The price of $1.168383 rose by 0.68%

Although the European Central Bank kept interest rates and purchases constant, Christine Lagarde (ECB Governor) hinted at higher inflation for longer periods of time. However, traders were not convinced that their bets about rate increases sooner than expected by Christine Lagarde.  

Lagarde conceded that the decline in inflation would “take a little longer than we expected,” reflecting energy, recovery demand that is outpacing supply, though added that the medium-term outlook remained intact.

But market participants aren’t convinced and believe the central bank has grown more concerned about inflation.

“In our view, the ECB is clearly crawling back from its fully convinced view of inflation being transitory,” ING said.

”This was among other things reflected in the finer details, for example, the scrapping of a sentence such as ‘Measures of longer-term inflation expectations have continued to increase, but these remain some distance from our two per cent target”  but also in the assessment that wages will rise,” it added.

This subtle change in the central bank’s stance on inflation doesn’t help its case and will continue cast doubt on the ECB’s inflation outlook.

“When you fudge the arguments and interpretations, they take over the driver’s seat. Folks who have been through multiple cycles know full well that markets tend to lead central banks on the way in and the way out more often than not,” Scotiabank said.

Lagarde also supported, but not convincingly, market bets that the bank would raise its deposit rate 20 basis points, to minus 0.3%, by December 2022.

“Our analysis certainly does not support that the conditions of our forward guidance are satisfied at the time of liftoff as expected by markets, nor any time soon thereafter,” Lagarde said.